Airbnb has evolved exponentially over the past few years, and if you’ve found yourself here at our blog, you’ve likely heard about just how great of a way it can be to make more money from an investment property in comparison to traditional long-term rental. As a property management firm here in Canada’s capital, we’ve seen short term rentals find a lucrative niche in our portfolio. Millions of people currently utilize the platform to book unique experiences around the world, and in Ottawa this is no exception. While the opportunity could be large with our city seeing 10 million visitors annually, there are a number of items that should be weighed carefully before you make any decision.
The Bright and Sunny
Earnings are Greater for Short Term Rentals
At the end of the day, you’re involved with managing a property in Ottawa in part because you want to make money. Some of our initial numbers suggest that short term rentals can generate 135% more revenue in comparison to long-term rentals. With such a big differential, it really is worth your time to take a look at the numbers a little closer and understand what could possibly play into that difference.
Being an alternative accomodation, it should have been nearly impossible to not have heard about how disruptive services like Airbnb are. The hotel industry sees Airbnb as a threat, and they have been very vocal. Their arguments have been presented with an energy similar to the Taxis vs. Uber dynamic. For you, the numbers are important. In a report published in September 2017 for the Hotel Association of Canada, CBRE presented that hosts renting two or more entire-home units were the fastest growing hosting segment, bringing in over $238 million and seeing a 134% growth in revenue over the past two years. In Ottawa, this growth was 142%, tied to a 111% growth in the number of multi-unit hosts, which themselves represent 9% of the local market. This means that most hosts in Ottawa are single unit hosts. Growth in 2018 with likely continue, though we believe it will slow slightly as the early entrants have already made their mark and the regulatory environment remains unclear. In either case, it’s a great revenue opportunity, and competition is still fairly low in the city.
If you’re interested in the market data that they used as the source, check out AirDNA, a service that processes data and presents from Airbnb.
Exposure to Millions of People, Worldwide
Airbnb is growing at a rapid rate, providing you exposure to millions of people worldwide. With competition in the city at a low-medium level and , there is still time to capitalize on the audience that they’ve managed to reach. Of course, it will take some hard work and creative marketing (off the platform as well), but vacancies could become a thing of the past if you play your cards right.
Specialist Tools At Your disposal
Airbnb isn’t just a marketplace where you list your property and are left to your own devices. Instead, the platform offers an array of magnificent tools to help you out. Instant book allows guests to book automatically which reduces communication, and smart pricing assists with your pricing strategy so you don’t always have to adjust it manually. You are also better protected through guest profile verifications, which connect guests to their other identities, providing some better assurance that they are who they say they are.
The platform also can collect and remit some taxes at the point of payment. Did we mention that they handle all invoicing and payment?
All Disputes are Mediated
When it comes to dealing with guests on a regular basis, there may come a time when you have a disagreement. Whether it’s an argument over services provided, or a dispute over damages, it can be difficult to handle and can put your reputation on Airbnb and elsewhere at risk, harming future profitability. With Airbnb, customer support is included and you will also receive support through the whole process. As a landlord, it can be difficult to go it alone, and having such a service provided to you for free is truly priceless. Of course, you don’t want to have to use dispute resolution if you can avoid it! It’s key to your success on the platform that you offer great service to your clients and make their stay with you as enjoyable and stress free as possible.
Airbnb Protects Your Investment with Guarantees and Insurance
Something very important to think about when deciding whether to become a host on Airbnb is the safety of your home, property, guests, and neighbours. As part of your Airbnb account, you automatically have Host Protection Insurance that provides liability coverage in case your guests are injured or there is property damage. In addition, you are automatically eligible for $1,000,000 in coverage as part of the Host Guarantee. This is not insurance and is not a replacement for homeowners or renters insurance however, and there are limits on certain kinds of items or places such as personal liability and common areas, which are not covered. If you’d like more details, check out their terms. In addition, you can rest assured that guests that cause trouble can have their access to the platform revoked. This goes for hosts as well, so be responsible!
Before beginning your journey with Airbnb, immediately consider your location. In Ottawa, as in most cities, the downtown core is a great place to operate, while the outskirts of Orleans or Nepean might see orders of magnitude less demand. Location is everything, so consider your distance to amenities (personal and business), entertainment, and transportation corridors before you list.
Prices Can Fluctuate
With short-term rentals on a site like Airbnb, prices fluctuate all the time, which means you need to constantly be managing your listings to ensure your bookings don’t dip. Reasons for the fluctuations vary, such as special occasions in your area, your location and supply and demand.
Local Laws and Regulations
Being so disruptive, the short-term rental market is still largely unregulated around the world. This has left authorities desperately trying to conjure up regulations without much of a framework. In Ottawa, specific regulations are still shaping up, but we can expect to look to Vancouver and Toronto for examples of what regulation might look like. You will likely be required to register with the city and will face limitation on the when, how, and for how long of the rental. In general, it will be important to remain compliant with currently existing regulations, including fire and building safety codes, while keeping an eye on the situation.
With an eye on the future, length of stay is a major consideration. For example, in December 2017 Toronto City Council passed a vote on rules that would restrict listings on Airbnb to registered primary residences, banning listings of secondary suites such as basement apartments for short term rentals less than 28 days. In this case, it seems that a tenant of a secondary suite may still list as long as that tenancy is their primary residence, and they meet the requirements of these proposals, provincial law, and their lease terms. Restrictions were also proposed on the number of nights that a room may be rented out; 180 nights being the maximum for the year unless the homeowner was present, in which case there would be no limit for up to 3 rooms.
As the saying goes, the only things certain in life are death and taxes. Almost everyone hates paying them, but you’ll need to be compliant regardless. While we suggest talking to your accountant about the exact implications, know that you will need to report your income from Airbnb and potentially remit provincial and even municipal taxes. Last year in Ottawa saw the city extending a mandatory 4% hotel tax to short term rentals like Airbnb. This became effective on January 1, 2018. With the HST in Ontario, this takes taxation to 17%.
Other considerations around tax include deductible items, pro-rating deductibles, and the form of the income. If you are offering services to your guests above and beyond their room with you, you might be considered to be operating a business. Keep good records and get assistance from your accountant to keep you in the clear.
Hosting Takes Effort
Regardless as to where you start, your journey on Airbnb isn’t going to be all smiles and laughs straight away. You’ll need to be a responsible and attentive host, and it will take time to establish yourself on the platform. During the initial phase, you may need to price your listing lower than your competition, just to build a presence and a good number of 5-star reviews. In addition, you’ll need to work your way up the search rankings – Airbnb love activity, so your response time to guests will need to be fast. As part of your hosting plans, we also suggest hiring a professional real estate photographer. Professional photos can be a real boon to the performance of your unit on the platform.
Member of a Condominium Corporation?
If your property is part of a condominium corporation, you may not be able to legally post your property for rent on Airbnb. These corporations and others similar to them, like incorporated homeowner associations, have the power to dictate what you can and can not do in your unit.
Marijuana, Smoking, Alcohol, and Other Substances
Beyond your coverage with Airbnb through their host guarantee and liability insurance, consider closely your stance on the usage of substances in your apartment. With Ottawa being the city that it is, we expect that Marijuana usage in particular will become more prevalent in the units that we manage. Regardless of the legality, make your stance on substance use well known to your occupants through your communications, listing, and house rulebook. Consider the implications of requiring a security deposit to cover incidentals like spills on the carpet or smoke cleanup.
You Still Need Insurance
While we mentioned Airbnb’s $1 Million coverage and liability insurance, you will likely still require your own personal insurances to provide you with adequate protection. At a bare minimum, we suggest that you speak with your insurance provider and let them know that you intend to rent out your property. Protecting yourself and your investment are essential.
Ultimately, the decision to use a short term rental platform such as Airbnb comes down to what you want to accomplish with your rental property. The reasons why you’ve decided to become a landlord could be many, but in any case you will have to consider your personal limits, timelines, and risk profile as an investor. Whether or not you have time, if you’re interested in adding Airbnb services to your portfolio, consider partnering with a property management company.
If you would be interested in how we could provide help to you in your journey with your investment property, stay tuned to our blog or feel free to give us a call or otherwise contact us. We do things a little differently here at Fahel and Co., and we’d love to help you exceed your goals!
Looking for a risk free way to increase your rental income? Make sure you file for your annual rent increase. If you’d like some help with the process, rely on our expertise and our fully managed rent increase concierge service.
In Ottawa, as elsewhere in the country, real estate is hot, and is driving thermal transfer to the rental market. According to a report released by the CMHC in late 2017, vacancies in purpose-built accommodations in Ottawa declined to 1.7% from 3.0% in October of 2016, driven in part by stronger demand and less new supply entering the market. Condominiums were in a similar situation but at the high end were potentially crowded out by luxury apartment rentals. On average, they held a 2.9% vacancy rate. Whether you are an experienced landlord or are looking to purchase your first investment property, now might be a good time to consider getting some help from a property management company in Ottawa.
Property managers offer an alternative to doing everything yourself, and can present a way of taking advantage of economies of scale, freeing you to manage an investment instead of taking on a second and third job (at minimum). However, choosing the right partner is extremely important. We don’t need to tell you that your investment is precious to you, and represents a significant time investment beyond what you paid for the property. It is therefore crucial that you properly vet any potential candidates. It truly must be looked at like a partnership.
The first time that you have the opportunity to speak with a prospective property manager, you want to get the facts and a sense that you can work with them on a personal level. We’ve provided a list of questions below along with some additional explanation that might help you get this information along with confirming their professional credentials. In this meeting, you are interviewing them, so allow yourself to get into that mindset. Remember that good questions are to the point, but asking slightly open questions may take you in valuable directions!
1. What is your domain of expertise?
After introductions, it is our experience that the best way to start off an interview with a prospective property manager would be to establish what kind of business they operate and what kind of properties they personally have the most experience with. Even if they have this information in their brochures or on their website, it is always good to clarify.
We suggest intentionally framing the question more vaguely, as above, so you also open the door to seeing how they might be a fit for your personal needs.
Even if you are surprised by the answer you receive, don’t take the first response as a deal breaker. You still have the rest of the interview ahead of you, and you might find that they still could work well with you in the end. Mentally assign a weight to this and the upcoming answers and consider the risks associated with taking on work outside of one’s expertise. If you have a single residential property and their experience is mainly single-unit commercial, there is a smaller chance that they will give your property the same attention. They might also not have processes in place that can handle the exact needs of multi-unit residential properties.
2. How many properties are you currently managing?
In our opinion, the next most important question to ask would be this one.
Depending on the proportion of high and low maintenance properties in their inventory, you might find that your needs could get mixed in with the crowd. Larger firms typically come with several advantages, including more buffer room to cover unexpected expenses. Given their workload, they might also suffer from drawbacks such as slower response times and lower touch customer service.
The situation could be vice versa for smaller firms. In either case, consider the structure of the company and also asking them about specific business processes. For example: do they push around a lot of paper, or are their multiple layers of approval to get work done? Depending on their situation, you could potentially end up with a surprising repair bill, more frequent vacancies, or even become involved with some of the management yourself.
Another question that you could ask around this same topic might be: “how many employees do you have?” Consider the split between property managers and other staff. For the number of properties they manage, you might be surprised at what you hear. Traditional property management firms have historically retained staff at a higher ratio of employees to properties managed than streamlined operators like Fahel and Co, mostly due to difference in process execution. There is also the possibility that the company will retain their own maintenance staff, which also has its own pros and cons.
3. How do I get paid? Is there a set schedule?
As the whole reason for having an investment property is to see returns on that investment, this is a really important question! In dealing with the majority of property management companies, including in Ottawa, you should expect to receive an amount equal to gross rent less the manager’s service fees. In terms of timing, expect to receive your money shortly after rent is due and has been paid by the tenant. This makes it important to consider how your tenants are paying. Property management firms with modern business processes should offer direct debit or online payment to tenants, which improves the rate of collection significantly. More storied firms, or those with older tenant populations, might experience delays as cheques wait to be cashed and cleared.
4. How do you charge for your services?
As your investment property is exactly that, an investment, you should only be keeping it in your portfolio if it meets your personal financial objectives, including requisite returns. Typical property management companies in Ottawa and elsewhere charge for 3 core services:
Each service has a different charge structure. Tenant sourcing is essentially a “one time” activity, conducted whenever a tenant needs to be found for your property, and is typically charged to you as one month’s gross rent. General management services are charged monthly at a low percentage of gross rent, with rates varying dependent on the types of services that your property manager provides. Some property managers split their management services into different tiers based on providing additional inspections, guarantees, or warranties. If your property management company has their own maintenance staff, expect that to be built in to the rate. However, still expect to pay for services on an adhoc basis. Most firms in Ottawa will still charge for work over and above what they deem upkeep or recurring maintenance. If incidentals are not covered by your maintenance rate, upkeep services are frequently charged at a rate slightly above what it costs to have the work done, representing the time the property manager took to find the contractor and manage the job to their quality standards.
5. How do you handle upkeep and monitoring?
Perhaps the most important job of a property manager is looking after the day to day operation of your investment. If it is not running smoothly, your prized asset could quickly become a liability. Ask what sort of activities the property manager conducts towards this end. One major item would be inspections, both in quantity and quality, which might depend on what management package you’ve chosen and what fee you pay.
Beside the premises, ask what the property manager does to keep tenants happy. They do something for the tenants, right? Some firms are like us, providing 24/7 contact centers for issue reporting, while others go as far as running tenant newsletters. Sometimes going the extra mile can help to increase retention and therefore your property’s lifetime production is improved as well.
6. How can I keep track of my property, and what you've done?
Advances in technology have brought a few perks to the world of property management, and as mentioned earlier, the benefits flow down to clients, and even tenants! In keeping you informed, property managers now have the ability to report on their activities in a previously unprecedented on-demand fashion. For example, while the majority of our clients still prefer a monthly report, they can now log into their client portal at any time and get the status of their properties and any work being done on them.
For example, consider that you will experience a plumbing issue: here you could check on the status of the fix, review the contractor’s quote, or check on the completed work via posted pictures. If you’ve driven by the property in the summer and are curious as to why the lawn looks so great, you could check out who your property manager had contracted. In the end, technology has evolved significantly in this industry. For you, this means a much better service for your money. If the company you’re interviewing does not have this sort of service in place, consider their employee count and number of properties under management when it comes to their ability to provide you with the amount and quality of information and service you need.
7. How do you screen tenants?
Tenant search and management are perhaps the number one and two reasons why our clients have come to us. Many of them were previously landlords and realized after a time that the amount of work going into their property left them working a second job. Beyond simply doing the legwork required to find prospective tenants, you need to vet them properly. Choosing the wrong tenant can sometimes be worse than not having a tenant at all, with “professional” tenants leaving investors on the hook for 10s of thousands of dollars. When you receive an answer, checklist the basic items like income and credit screening, and criminal record checks, but also ask whether they do anything else. Be aware that rentals in Ontario are subject to the Ontario Human Rights Code and the Residential Tenancies Act, among other legal frameworks, and so there are limits on what sorts of tests can be potential tenants. Ensure that your potential property manager operates in an ethical fashion!
8. How long is your average vacancy?
Every property management company will have a clause in their lease to tenants that dictates a certain amount of time between notice and the intended move out date.In Ontario this is defined and is generally 60 days, but ultimately notice is dependant on the type of lease and considerations such as whether the termination of the lease was mutual or another tenant had already been found. In every case of vacancy, every day your property stays vacant is a day that you are paying the mortgage on the property out of pocket. Time is money, so make sure your prospective hire is in line with the average vacancies for the city you are in. As a bonus, great property management firms will already have a number of potential tenants lined up just in case leases expire prematurely.
9. What kinds of insurance do you carry?
Property managers can carry of wide range of insurances, depending on the properties they serve and the conditions in their market. Beyond the requirements, it might be important to you to know whether they are covered for rental income replacement, sewer backup, tenant damages, or other incidents. The kinds of insurance they carry can give you insight into their general outlook and strategy.
10. Can I have a sample of the tenant lease agreement?
On April 30, new regulations will come into effect in Ontario that will create a standard form for landlords and tenants. Asking for a sample of the tenant lease agreement should do more than provide you with a copy. As part of posing this question, ask them to clarify what these new regulations mean to you as an investor.
11. Do you have any references that I could speak with?
This one should almost speak for itself! The response you get here should give you an idea as to what kind of business this company runs. A well-run, modern property management firm should have no problem finding someone for you to speak to. The industry is highly competitive and very mature, so customer service and efficient operations are top priorities. To keep yourself safe, take care to do a quick background check on the references they provide you. Make sure they are at least at an arm’s length away from the company, and that they would not have a conflict of interest in providing positive feedback to you.
Finally, remember to treat this interview seriously. Prior to the meeting, take some time to look up the company online. Check to see if there are reviews available, and if there are, feel free to bring them up in your discussion once you’ve met. While online reviews aren’t the final word in evaluating anything (and might be astroturf), they can provide you with valuable direction.
After running through these questions, you should be well on your way to start comparing your options more clearly. If you’d like to know how we fare, please feel free to give us a call. We hope that you’ve found something valuable here that can help you make the best of your investment!
Resident retention іѕ an іmроrtаnt соnѕіdеrаtіоn for mаnаgеrѕ of multі-fаmіlу properties. It tаkеѕ quite a bit оf ѕаlеѕmаnѕhір аnd еffоrt tо brіng іn new сuѕtоmеrѕ. It іѕ much еаѕіеr to kеер уоur residents hарру аnd give them reason tо ѕtау.
Yоur rеѕіdеntѕ wіll develop good mеmоrіеѕ оf thеіr new hоmеѕ after thеу mоvе into thеm. Thеrе are ways tо capitalize оn this іdеа. You саn start a tіmе сарѕulе еасh year fоr all thе tenants. It соuld be a bоx or other container tо hоld all the residents' mеmоrіеѕ.
You соuld hаvе thеm put in thеіr оwn оріnіоnѕ оf whаt was mоѕt important аbоut thе уеаr. Thеу соuld put іn the best media оf thе уеаr-DVD'ѕ, CD'ѕ, books, or anything else. Yоu could іnсоrроrаtе advertisements frоm nеw buѕіnеѕѕеѕ іn thе аrеа.
Phоtоѕ or other tуреѕ of visual media ѕhоwіng rеѕіdеntѕ саn bе put іn thе time сарѕulе, too. Yоu саn hаvе thе rеѕіdеntѕ рut іn ѕurvеуѕ lіѕtіng thеіr favorite items. All this will hеlр wіth rеѕіdеnt retention, bесаuѕе thе rеѕіdеntѕ will be excited whеn the tіmе сарѕulе is ореnеd.
Thіѕ fosters a ѕеnѕе of community. Another іdеа tо dо thе ѕаmе thіng revolves around the ѕwіmmіng рооl. Many реорlе like to get tоgеthеr and sit аrоund thе pool tо tаlk. Mаkе thіѕ situation аvаіlаblе bу mаkіng the аrеа аrоund thе рооl lаrgеr and adding mоrе seating.
Rеѕіdеnt portals help with rentention bу whісh rеѕіdеntѕ саn connect uр by іntеrnеt tо thе рrореrtу'ѕ office. This way they саn take саrе of any property related buѕіnеѕѕ that соmеѕ uр. Hаvе реорlе аlwауѕ available tо аnѕwеr thе рhоnеѕ. If thіѕ іѕ dоnе аrоund thе сlосk, thе rеѕіdеntѕ will feel that their needs are bеіng met.
It is аlѕо gооd tо have mаіntеnаnсе реорlе аvаіlаblе аt times when реорlе аrе аt home. Rеѕіdеnt rеtеntіоn gоеѕ uр when реорlе do nоt hаvе tо sit аt hоmе аnd wаіt fоr a tесhnісіаn tо mаkе a rераіr. Thеу also dо nоt want ѕоmеоnе соmіng іntо thеіr home whеn thеу аrе gоnе. Thіѕ makes them more аt еаѕе.
Keeping them happy
Gіftѕ саn help wіth resident retention. A resident might nоt ѕtау ѕоlеlу fоr a gіft, but іt соuld be thе tірріng роіnt. Onе іdеа is to gіvе уеаr-lоng ѕubѕсrірtіоnѕ to NеtFlіx when the rеѕіdеntѕ ѕіgn uр fоr another year. This interests most people.
Whаt іѕ mоrе, іt kеерѕ them hарріеr wіthіn thеіr hоmеѕ whіlе thеу live at уоur property fоr another уеаr. Thіѕ mіght mean уоu have resident retention аt lеаѕt раrtіаllу accomplished fоr thе nеxt уеаr, too.
Anything you саn do durіng thе year the rеѕіdеnt hаѕ lеаѕеd fоr tо еnсоurаgе them to ѕtау іѕ wоndеrful. Yоur реrѕоnаl attention tо thе rеѕіdеnt іѕ of utmost importance. Mаkіng the community соmе tоgеthеr hеlрѕ еvеrуоnе fееl a раrt оf thіngѕ. Thіѕ, too, brіngѕ rеѕіdеntѕ a feeling оf hоmе. Thіѕ іѕ a boon to rеѕіdеnt rеtеntіоn. Aftеr аll, you dо nоt want tо lеаvе your hоmе.
Rеѕіdеnt retention іѕ іndееd an іmроrtаnt subject. Try to brіng ѕоmе іmаgіnаtіоn tо the way you treat уоur rеѕіdеntѕ. Find ways tо gіvе thеm rеаѕоnѕ tо mаkе your property their permanent home.